Than One Yota of Difference Russian Wimax Service Provider Yota Succeeds by Offering an Innovative Service—And Exporting It Abroad
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White paper More than one Yota of difference Russian WiMAX service provider Yota succeeds by offering an innovative service—and exporting it abroad • With 350,000 subscribers, Yota is one of the fastest growing WiMAX service providers—and one with a highly innovative business model. • Yota continues to expand. In Russia, its network will cover 180 cities by 2012. It has just launched a network in Nicaragua, and next on its list are Belarus and Peru. • At Yota, the focus is not on technology, but on the customers: making sure they have the devices, applications, and bandwidth they want, making it easier for them to sign up, and giving them a compelling service. White Paper More than one Yota of difference Yota is busy these days. The first Russian service provider to deploy tier cities, it will face a more price-sensitive, but largely a mobile WiMAX network, Yota has signed up over 350,000 underserved market. customers in the six months since its commercial launch in June 2009 (Table 1). It continues to sign up 3,000 customers a day, and is The Russian wireline fixed market is very competitive. In Moscow the first service provider to have launched a WiMAX/GSM and St. Petersburg, multiple service providers offer broadband smartphone. While expanding domestically, Yota has also soft- services over different access technologies (DSL, fiber, fixed launched a WiMAX network in Managua, Nicaragua, and is wireless), often at rock-bottom prices. In this market, Yota does not planning for networks in Belarus and Peru. aim to be the lowest-cost provider, betting that customers are willing to pay for the benefit of unlimited access and mobility. As a greenfield service provider new to the telecom market, deploying a new technology and a new type of service, Yota’s success is remarkable. The company has avoided the common Table 1. Key Yota facts as of December 2009 trend among emerging market operators of focusing on basic fixed broadband connectivity in underserved areas. Instead it offers Key Yota facts as of December 2009 mobile broadband connectivity in cities where 3G is available, and Commercial launch: June 2009 where wireline broadband, including residential fiber in some Spectrum: 30-40 MHz in the 2.5 GHz band areas, is available and cheap. Customers: more than 350,000 This paper explores what made Yota’s achievements possible, and Average traffic per customer: 10 GB/month what lies at the core of its unique market approach. We look at the Employees: 1,200 market in which it operates, at how it is building and expanding its Domestic coverage: Moscow, St. Petersburg, Ufa (commercial), network, and at the proposition it offers to its customers in terms Sochi and Krasnodar (soft launch) of services, devices, content and applications. Finally we widen the scope to follow Yota’s activities in markets outside Russia and to Vendors: Samsung (WiMAX RAN), Cisco (fiber backhaul, core), look at future prospects. Bridgewater (authentication, authorization and accounting [AAA]) Pops covered: 23 million Backhaul: built 3,000 km own-fiber backhaul network with up Winning market share in to 180 Gbps bandwidth Devices supported: over 50 laptops, 1 WiMAX/GSM the Russian market smartphone, 2 laptop dongles, 2 desktop modems with Wi-Fi Service plans: US$29 for laptops or desktop modems, US$16 Russia has one of the highest levels of WiMAX activity worldwide. for smartphones More than 20 operators have declared ambitious deployment Investment: US$470 million for Russian market invested to plans, often backed by deep-pocket investors or parent companies. date, plus an additional US$350 million for further Russian expansion and US$500 million for international deployments While Russia has great growth prospects, it is also a challenging Ownership: WiMAX Holding Ltd., with a 25.1% share owned by market (Table 2). Outside Moscow and St. Petersburg, broadband Rostechnologii State Corporation penetration is still very low (6.4% of population, compared to 20% of population in Moscow). Yota targeted these two urban areas International markets: Belarus, Nicaragua (soft launch), Peru initially for a mobile broadband service intended for the affluent 2012 target: service available in 180 Russian cities with a and technology-savvy customer segment. As it moves to second population of over 100,000 Source: Yota © 2010 Senza Fili Consulting • www.senzafiliconsulting.com |2| White Paper More than one Yota of difference Fixed wireless and wireline operators are not Yota’s only There are many fixed BWA and WiMAX operators in urban areas, competitors. Yota’s primary targets are mobile users who want to but they are mostly niche market operators, with fewer than have a broadband connection everywhere they go. As a result, Yota 10,000 subscribers. Three other IEEE 802.16e WiMAX operators, competes also with cellular operators, although their propositions Comstar, Freshtel and Synterra, have announced network to subscribers vary. After years of operation, cellular operators launches. They have not released subscriber numbers, but their boast excellent coverage, but they charge premium prices. With marketing efforts are much less aggressive than Yota’s. the more advanced WiMAX technology, Yota offers higher data speeds at lower per-MB prices than cellular operators, but cannot yet compete on nationwide coverage. 3G has been introduced only recently in Russia and so far only in A new breed of mobile urban areas. Construction of 3G networks in Moscow was approved in December 2009, and three operators (Mobile broadband service TeleSystems, Vimpelcom and Megafon) have launched in early 2010 their 3G networks. Despite a mobile penetration well over provider 100%, cellular data revenues are still low compared to developed countries. As a result, competitive pressure forces Yota to keep Dennis Sverdlov, Yota’s General Director, tirelessly promotes Yota’s prices relatively low compared to mobile WiMAX operators in vision to audiences worldwide. His focus is not on what WiMAX— developed countries. In the markets where 3G is available, Yota has or technology in general--allows a service provider to do; instead, not seen any impact of the 3G service availability on its customer he talks about what customers want, and what they are willing to take up, suggesting that Yota has been successful at differentiating pay for. The challenge for a service provider is to find the most its services from those offered by mobile operators. suitable technologies to meet these requirements—and Sverdlov believes that WiMAX fits the bill. While this may seem like an obvious approach, it can be revolutionary for operators Table 2. Russian telecoms market accustomed to loudly advertising the technology—3G, WiMAX, or LTE—rather than the services that they sell. Russian telecom market Perhaps not surprisingly, Yota insists that it is not a WiMAX Broadband penetration: 6.4% of population, with operator. It claims to be a mobile service provider that decided to approximately half of subscriptions in Moscow and St. use WiMAX to meet the needs of its customers (Yota is very careful Petersburg. In Moscow, broadband penetration is over 20% of not to refer to them as subscribers). Yota does indeed have a population, equivalent to more than 60% of households strong commitment to WiMAX, but the distinction reflects the Internet penetration: 32% company belief that a successful service provider needs much Mobile phone penetration: 144% more than a good radio access network (RAN) to attract customers. Fixed phone penetration: 23% “This approach has led the management team to work sometimes 3G networks recently launched in urban areas against the accepted wisdom of what can and cannot be done, and Mobile ARPU: US$9 chart a new path,” explains Shane Kwon, Senior Manager in the Data ARPU: 17% or US$1.53 CIS/EMEA Sales and Marketing Group at Samsung, who has been Other mobile WiMAX operators: Comstar (commercial, 2.5 working with Yota during the rollout of the network. The prevalent GHz), Freshtel (soft launch, 3.5 GHz), Synterra (commercial, 2.5 IT and consulting—as opposed to telecom—background of Yota’s GHz, mostly pre-WiMAX) management has been instrumental in creating a culture focused Source: ITU, mobile operators, Ovum, on results and with little respect for legacy offerings. Risk taking Russian Federal State Statistics Service, WiMAX Forum, Yota © 2010 Senza Fili Consulting • www.senzafiliconsulting.com |3| White Paper More than one Yota of difference km backhaul network can carry up to 180 Gbps and provides 200 What makes Yota stand out among Mbps per cell site. While this is more throughput than the current mobile data operators? RAN can generate, it will allow Yota to increase RAN capacity “A group of young ambitious people without having to upgrade the backhaul. excited to be in a startup company but with limited telecoms background, The deployment of the backhaul network required a substantial supported by brave investors, focused on effort—about half of the capex invested to date in the project was a single goal: to provide great service to allocated to backhaul. their customers,” says Dennis Sverdlov, With the backhaul in place, Yota started to deploy the RAN WiMAX Yota’s General Director. network with IEEE 802.16e equipment from Samsung. From the very beginning, Yota decided to work with a single vendor in all markets to speed up the deployment process. Using the same and acknowledgement of unresolved problems are equally equipment, Yota has been able to expand to new markets and to encouraged. take advantage of experience gained in previous installations. This approach, which worked well given Yota’s initially limited staff Yota’s vision is based on few simple tenets: resources for installation, has also been followed in the international expansion. Samsung is providing the WiMAX base .